HUNTER-founded private health insurer NIB has posted an underlying operating operating profit of $83.2 million - a drop of 27.2 per cent compared to a year ago.
Releasing the group's half-year 2020 results to the stock exchange on Monday, NIB managing director Mark Fitzgibbon described the results for the first six months to December, 2019, as "disappointing" but noted the challenging market conditions.
"We didn't anticipate getting hit so hard this year but it has," he said.
Mr Fitzgibbon said higher claims inflation against NIB's insurance businesses - including is Australian Residents Health Insurance (AHRI) and New Zealand operations - had driven the operating profit drop.
Another factor was an accounting nuance whereby NIB's international, inbound health insurance and ARHI ahd previously benefited from the release of an unpaid claims reserve.
"When you compare [this result] to last year's, the year before was grossly overstated," he said, saying the underlying operating profit drop was actually more around the two per cent mark when using the "most recent" claims results.
Mr Fitzgibbon said the "reality check" had been provided by claims inflation returning to more historic levels.
"Rather than making seven cents in the dollar which we have prior, we are making six cents - one per cent doesn't sound like a lot but overlaid against two billion premiums, it's a fair bit," he said.
"We are satisfied, however, that overall it's a reasonable level of profitability."
NIB also recorded:
- Group underlying revenue of $1.3 billion (up 6.4 per cent), driven by growth in membership and premiums
- Net profit after tax of $57.1 million (down 23.1 per cent from the same period in 2019).
- Group claims expense of $0.99 billion (up 10.2%)
- Interim dividend of 10.0 cents per share full franked
Noting a "stand-out operating performance" in its New Zealand business, NIB announced that all of its business segments had grown in membership and premium revenue in the first six months of the 2020 financial year.
"Sales were up more than 12 per cent compared to the first half of last year and NIB accounted for 38 per cent of total industry policyholder growth. Overall we grew membership 1.4 per cent compared to just 0.3% for the industry as a whole," Mr Fitzgibbon said.
